Downer shares dip on news of KPMG legal battle
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More news: Downer EDI shares dropped after the contractor pulled its auditor KPMG into ongoing class action proceedings.
KPMG resigned as the contractor's auditor shortly after Downer announced it had filed a defence against the professional services firm following allegations by shareholders that it misrepresented and withheld information about a utilities contract.
Shares were trading 1.5% lower at $4.65 by 1:45pm AEDT.
KPMG to 'vigorously defend' Downer claims
More news: KPMG has resigned as Downer EDI's auditor and has said it is "disappointed" that its client has pulled it into its shareholder class action.
What they said: A KPMG spokesperson said: "We are disappointed by the decision of Downer EDI to commence proceedings and bring a cross-claim against KPMG in response to a class action claim lodged last year against Downer for breach of continuous disclosure obligations.
"We have been open in our engagement with the company throughout this matter and continue to have a high degree of confidence in the audit work performed," they said.
"Commencement of the proceedings leaves KPMG with no alternative but to seek to resign as auditor of Downer Group and we will take appropriate steps to affect this. We intend to vigorously defend the claims. As the matters are before the court, we are unable to comment further."
Downer Group files defence against KPMG over class action
The news: Engineering and services contractor Downer EDI has pulled its auditor KPMG into its class action brought by its shareholders on financial misrepresentations by filing a defence against both.
The numbers: In February 2023, Downer said it had misreported earnings from a contract awarded by Transport for NSW. The post-tax earnings were inflated by about $22.2 million between April 2020 and June 2022.
Downer's share price has increased 52.12% to $5.02 over the last 12 months.
The context: Downer is now under investigation by NSW Independent Commission Against Corruption for allegedly making misrepresentations and withholding information about the contract, leading its chief financial officer Michael Ferguson and chair Mark Chellew to step down from their roles.
The class action suit was was filed by shareholders of the company who acquired their shares between 1 April 2020 and 27 Feb 2023.
ASX- and NZX-listed Downer said on Monday it had filed its defence against the class action and pleaded a defensive against its auditor KPMG through a third party statement of claim and proportionate liability defence.
The group will also commence a process to appoint a replacement auditor for the rest of the current financial year, in anticipation of KPMG ceasing to act as the company's auditor later this month.
The source: ASX announcement
